Hi there,
I'm looking at renting out the flat I've lived in for the past eight years. I've got an endowment mortgage on it, and was looking to change to a Buy To Let mortgage. But I've been advised now that cashing in the endowment isn't a smart move - but if I don't cash it in, I've just got to leave it sitting there untouchable for another 17 years?!
Any explanation of my options in layman's terms would be much appreciated.
C.
There is no such thing as as an endowment mortgage. What you have is an interest only mortgage plus an endowment policy, the endowment policy, in theory, will grow enough to be able to repay the original lum sum value of the mortgage, in 17 years time.
You can change your mortgage to, for example, a BTL mortgage, which may or may not have a repayment element, and what you do with the endowment policy is up to you. You could cash it in, make it paid up*, or keep it going. Whether its a smart move to cash it in is a difficult question to answer and dependent upon stuff like being able to foretell the future, but the key point is, that question is disconnected from the getting a new mortgage. You just need to be confident either that in 17 years time you can repay the mortgage lump sum in some way, OR, you dont mind selling the flat to do the same.
HTH
In message , FatFreddy writes
Why?
By whom? It depends on lots of things but in general my own personal view is that it would be a smart move.
No.
I would suggest you cash in the endowment, use the proceeds to reduce your mortgage and at the same time go to a truly independent IFA & Mortgage broker and look to see if you can get a better deal than offered by your current lender. As you will be letting the property out consider leaving the loan on an interest only basis.
Another point - make sure the endowment company remove any link to the mortgage to prevent any hassle in future.
Daytona
In message , Daytona writes
Yes, but its the other way round. May sure that the *mortgage* company remove the link to the endowment.
I would agree with cashing-in the policy. Up until about 2 years or so ago the 'sound' advice was to keep endowments running, but nowadays it is the opposite, as they have suffered years of poor performance and will never recover. You are better off cashing-in, and putting both the money you receive from it and the money you save (ie were paying the endowment with) towards reducing the debt. matty
PS - I cashed-in 3 policies a year ago, and did exactly that ;o)
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